U.S. Markets open in 16 mins

Cabela's Q2 Earnings Beat

Zacks Equity Research

Significant rise in comparable-store sales, strong performance by the company’s next-generation stores and growth at its CLUB Visa program facilitated Cabela’s Incorporated (CAB) to come up with stronger-than-anticipated results. The quarterly earnings of 62 cents a share surpassed the Zacks Consensus Estimate of 60 cents and jumped 31.9% year over year.

Total revenue comprising retail, direct and financial services revenue, increased 20.7% year over year to $756.8 million and comfortably surpassed the Zacks Consensus Estimate of $734 million.

Quarter Details

Total merchandise revenue, including retail and direct revenue, escalated 22.3% to $663.7 million during the quarter, while merchandise margins expanded 30 basis points to 37.7%, reflecting increased sales of higher margin products like soft goods in footwear and lower markdowns.

Cabela’s retail store revenue increased 25.8% to $483.9 million, reflecting strong performance of the company’s new next-generation stores and strategic merchandise and inventory planning. Comparable-store sales increased 10.5% during the quarter. The company marked a 0.6% increase in average ticket, while retail transactions rose 9.9%. Retail profitability (as a percentage of segment revenue) remained strong, expanding 30 basis points to 18.8% on account of higher merchandise margin.  

Direct business revenue escalated 13.7% year over year to $180.1 million, reflecting higher traffic at its .com business. However, operating margin (as a percentage of segment revenue) contracted 130 basis points to 17.1%.

Financial services revenue augmented 11.7% to $88.6 million, reflecting increase in interest and fee income. Credit card charge-offs as a percentage of average credit card loans for the quarter remained flat at 1.87%. During the quarter, delinquencies improved while active average credit card accounts increased 10.7%. Other revenue decreased 14.7% year over year to $4.5 million.

Total operating income jumped 15.7% to $66.9 million compared with $57.8 million in the prior-year quarter, whereas operating margin contracted 40 basis points to 8.8%.

Stores Update

During the quarter, the company opened 1 next-generation store in Louisville, Ky. and relocated the Winnipeg store. The company plans to open 3 new stores in U.S. and 1 new store in Canada in 2014.

Other Financial Aspects

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $345.5 million, long-term debt of $379.9 million and shareholders’ equity of $1,470.8 million. The company registered a 160 basis points rise in return on invested capital while remaining on course to increase it further in the coming quarters.

During the quarter, Cabela’s generated $60 million in cash flow from operations and incurred capital expenditures of $70 million. For 2013, management anticipates to incur capital expenditures in the range of $300 million – $325 million, attributable to its store expansion plans.

Other Stocks to Consider

Until any further upgrade in Cabela’s Zacks Rank, other stocks worth considering in the non-food retail, wholesale sector include Big 5 Sporting Goods Corp. (BGFV), Five Below, Inc. (FIVE) and Build-A-Bear Workshop Inc. (BBW) all of which carry a Zacks Rank #2 (Buy).

Read the Full Research Report on BGFV

Read the Full Research Report on CAB

Read the Full Research Report on FIVE

Read the Full Research Report on BBW

Zacks Investment Research

More From Zacks.com